In Europe, a massive $18 billion was spent on pay-TV services in 2003 and this is expected to double by 2007, says a report by independent market analysts, Datamonitor.
The European pay-TV strategies report says that for pay-TV revenue to reach $39 billion, providers will have to encourage current customers to subscribe to more expensive programming packages, as well as driving spending on interactive services and pay-per-view.
Subscription rates are expected to slow down in developed markets such as France and the UK. Future pay-TV growth will be impacted by the fact that a sizable proportion of consumers who are willing to pay for multi-channel TV have already done so. Further subscriber growth will require considerable market investment for limited return, says the report.
Free-to-air and basic services on digital terrestrial television and cable are expected to be the main drivers in subscriber growth. For pay-TV providers to remain profitable, substantial cost cutting is required. Lowering content and operating costs is key; for broadcasters it will mean reducing their carriage fees, according to Datamonitor.
UK satellite operator BSkyB has warned certain channels that they will have to accept greatly reduced carriage fees in the future. Due to more rapid subscriber growth than originally expected by BSkyB, channels had already benefitted from greater carriage fees and advertising revenues.
MTV has already signed a new contract with a 20% discount compared to the previous one. A contract worth â‚Ź30 million has been agreed for the seven music channels.
Cable operators view digital TV as a way to attract new customers. Although TV is not delivering profits, it can be used to attract customers to other services. Datamonitor said: “They should use TV as an incentive to attract customers to other high-margin products such as telephony and broadband.”
As scale is another important factor for pay-TV, operators across Europe will be keeping their eyes on recent mergers between Telepiu and Stream in Italy and Via Digital and Canal Satellite Digital in Spain. Costs savings are expected from streamlined sales, marketing, distribution and back-office management departments.
Related Links
